Sprint offers $2.1 billion to buy rest of Clearwire

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Published December 13, 2012

| Reuters

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Sprint Nextel Corp, the majority owner of Clearwire Corp, has offered $2.1 billion to buy the rest of the wireless service provider but it may have to raise its offer to get enough shareholder backing to secure a deal.

Clearwire, which said it is reviewing the offer, saw its share jump almost 15 percent on Thursday, suggesting that shareholders hoped for a higher bid.

Sprint offered $2.90 per share and said it would also provide interim financing of $800 million to cash-strapped Clearwire if shareholders agree to the $2.90 offer.

Sprint, which already owns 50.45 percent of Clearwire, needs approval from holders of 24.8 percent of Clearwire shares before it could take control of the company.

One Clearwire shareholder Crest Financial, criticized Sprint's offer on Thursday saying in a public statement that the deal was not in the interests of Clearwire shareholders.

Crest said it "intends to take whatever actions it can, including petitioning the Federal Communications Commission, to protect the rights of Clearwire shareholders against unfair dealing by Sprint and other parties."

Several other shareholders also told Reuters on Thursday that they were not happy with Sprint's current terms for the deal as they believe the company is worth more.

"This deal should happen. It's good for Clearwire. It's good for Sprint. $2.90 is not the right price," said a representative for one shareholder who suggested that a per share offer in the $5 to $8 range would be more acceptable to investors.

The person asked not to be named due to a lack of authorization to talk in the public about investments. Other shareholders also cited $5 as the lowest threshold for a deal.

Analysts also said that Clearwire shareholders would be very unlikely to accept Sprint's offer, which would allow the No. 3 U.S. mobile service provider to take full control of Clearwire's spectrum holdings to bolster its own wireless data services.

While Clearwire has been looking for new financing, analysts said that its need is not so urgent that it should accept Sprint's offer which they described as a "starting point."

"With a year of liquidity on the books and the alternative of raising additional equity or refinancing debt at this level, Clearwire is hardly without options, and we don't see why the company would necessarily jump at a the $2.90 bid," JPMorgan analyst Philip Cusick said in a research note.

Wells Fargo analyst Jennifer Fritzsche said Sprint's offer price compared poorly to other deals in the U.S. wireless industry that involved sales of wireless spectrum holdings. She calculated that comparable deals had valued wireless spectrum at fifty percent more than Sprint was offering to pay Clearwire.

Sprint declined to comment on whether it would revise its offer. Its proposed price is 5 percent higher than Clearwire's closing stock price on Wednesday, but more than double its $1.30 price on Oct 10.

Clearwire shares have risen sharply since then on increasing investor speculation that loss-making Sprint would use new financing from Japan's Softbank Corp to buy Clearwire. Sprint agreed in October to sell a 70 percent stake to Softbank for $20 billion.

CLEARWIRE REVIEWING OFFER

Clearwire, which also counts Sprint as its biggest customer, has long been seen by analysts as an acquisition target for Sprint, which needs to improve its network to compete with bigger rivals Verizon Wireless and AT&T.

Clearwire said in a regulatory filing on Thursday that it is currently in talks with Sprint regarding a "potential strategic transaction" and that a special committee of its board of directors has been reviewing the potential deal.

It did not offer an immediate response to the $2.90 offer.

Clearwire, which has been looking to raise more financing to upgrade its network and to keep the business afloat, has said that it has enough money to last it until the third quarter.

The Sprint offer values Clearwire at around $4.2 billion.

Another shareholder Mount Kellet Capital Management LP and has recently expressed concerns over a deal with Sprint, suggesting that Clearwire should look at other options.

Between Mount Kellet and Crest the two investment firms own nearly 15 percent of Clearwire's publicly traded shares.

Crest financial filed a lawsuit on Tuesday against Clearwire and Sprint to try to thwart a deal after reports emerged about discussions between the companies.

Clearwire's other minority shareholders include Intel Corp and Comcast Corp, which own around 12.4 percent between them. Sprint has been in discussions with those companies about purchasing their shares, according to people familiar with the matter.

Mount Kellet did not comment on the offer on Thursday. Intel said it was evaluating Sprint's offer while Comcast declined to comment.

A purchase of Clearwire would also need the approval of Softbank and is contingent on Sprint's planned sale of 70 percent of the company to Softbank, Sprint said in the regulatory filing. (http://link.reuters.com/san64t)

Clearwire shares closed up 41 cents or more than 14 percent to $3.16 on Nasdaq after the news. Sprint Nextel shares closed down 2 cents at $5.64 on New York Stock Exchange.